Holiday retail sales fall short of high expectations

(CBS News) NEW YORK - There's more disappointing news about holiday retail sales.

Last week's retail analyst "Shopper Trak" projected a 2.5 increase in sales for November and December. But Wednesday, "Spending Pulse" said holiday sales went up only 0.7 percent.

That would make this season the worst since 2008.

The early indications are that shoppers weren't in the holiday spending spirit this year, and some of the reasons had nothing to do with the economy.

Dana Telsey

CBS News

"Whether it was Hurricane Sandy and the need to spend on the home, whether it was the tragedy in Connecticut and took away the feel good factor -- it was a confluence of events that led to a 'it should have been better' holiday season," said Dana Telsey, a retail analyst.

A big part of the problem was in the densely-populated Northeast, where more than a fifth of the country's retail sales take place. Holiday spending priorities shifted after Hurricane Sandy as homeowners focused more on repairs than on gifts.

Also dragging down sales was uncertainty about the so-called "fiscal cliff" -- tax hikes and spending cuts set to take effect next year. If lawmakers don't reach a deal to avoid it, consumers could see higher taxes eating into their paychecks.

Even online sales suffered. Compared to past years of double-digit growth, this year, online holiday sales rose only 8.4 percent compared to last year's 15.7 percent.

Overall, holiday spending accounts for up to 30 percent of retailers' annual sales, so the disappointing season is a concern for an economy struggling to recover.

"Consumers need to have more confidence. Consumers need to feel that their jobs are secure," Telsey said. "It's not an ideal situation. It's more of a conservative, cautious time. And companies are managing carefully, consumers are spending carefully."

Retailers are hoping to lure customers with deep discounts of up to 75 to 80 percent as they try to salvage from this lackluster holiday season.

These numbers -- the first out this season -- are subject to change, however. There will be new data released from retailers next week, so there is hope that those numbers will be better than what companies have seen so far.

Elaine Quijano was named a CBS News correspondent in January 2010. Quijano reports for "CBS This Morning" and the "CBS Evening News," and contributes across all CBS News platforms. She is based in New York.